My husband and I are looking to buy a new house. On March 6, 2008 we we’re pleasantly surprised that the cap for regular mortgages would be lifted from 417k to 567k — which is definitely an advantage when you live in Seattle where the average home sells for over 400 grand. Even the headline says “pleasantly surprised“:
Last month, Congress and President Bush approved a stimulus plan that included a provision raising limits on conforming and Federal Housing Authority loans from $417,000 and $362,000, respectively, to 125 percent of a metro area’s median home price, with a ceiling of $729,500, through the end of the year.
Based on initial calculations using data for King, Pierce and Snohomish counties, local real estate professionals expected the temporary limit to be about $493,000. The limit announced Thursday, however, is $567,500.
Shucks those guys are always looking for ways to “stimulate” the economy. I was surprised to find out from my lender that this is not nearly what it is dressed up to be. He wrote me:
Since we last spoke the conforming loan limits have changed to $567,000 in our area. For these new loan limits, lenders have created a new pricing tier that falls between the old conforming and Jumbo’s. Rates in this new tier are about 6.375-6.625%. In comparison, conforming rates are at about 5.75% and Jumbo rates are at about 7.5%.
If we didn’t want the middle tier rates he said we could:
There is one more way to structure this, but it’s not for everyone. What some buyers are doing is making the first mortgage $417,000 and then doing a 2nd mortgage behind it. This allows you to get conforming pricing.
I nearly flew out of my chair. Exactly what benefit is there to increasing the regular loan limit if the interest rate is higher over 417 anyway? Isn’t this work around the one we would have had to have done if they didn’t lift the 417 limit anyway? This is ridiculous.
His response:
Your question is exactly what we in the business have been asking each other as well. When we heard rumors that the limits were increasing we just assumed that the current conforming (417,000 or less) pricing would apply to these new loan amounts. That turned out to be not the case. Most lenders are calling this new program “Agency Jumbo”, Wells Fargo is calling it “Temporary Conforming”.
For god’s sake, what the hell do we pay Congress for when this is what they come up. This is almost as brilliant as changing the Daylight Savings Time in order to prevent global warming which by the way was a f-ing pain in the ass for anyone who works in technology.
Apparently, I’m not the only one less than dazzled.
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